Delta Pilots Union Ratifies Deal

AP Online On Apr 24, 2006
Source: via NewsEdge Corporation

ATLANTA_Leaders of the pilots union ratified an agreement with Delta Air Lines Inc. that avoided a walkout and includes an initial 14 percent wage cut for pilots and assurances the union won't block any company effort to terminate its pension plan.

Whether or not Delta will get badly needed long-term concessions is now in the hands of the pilots, who must vote on the proposed contract.

The details of the agreement disclosed late Friday appears to give the nation's No. 3 carrier a significant level of permanent cuts to help it reorganize in bankruptcy, while also giving the pilots some help if Delta scraps the pilots' pension, which it has said it will likely do.

The total value of the annual concessions was not immediately clear because of the complexity of the agreement, but it appears to be less than the $325 million annually the company originally sought.

It also appears to be less than the $305 million the company had offered and lower than Delta's chief financial officer had said was "non-negotiable." Company and union officials declined to provide their own analysis of the deal.

The vote by the union leadership meeting in New Orleans was 12-1 in favor of ratification, according to a memo sent late Friday from the chairman of the union's executive committee to pilots, who will now be asked to approve it.

The agreement between Atlanta-based Delta and union negotiators was reached April 14, clearing one hurdle for the company by avoiding a crippling strike.

Now comes what could be the harder part - getting the airline's 5,930 pilots, who came to the brink of a walkout, to approve the deal.

But, he said: "Our goal throughout the Chapter 11 process has been to reach a comprehensive consensual agreement that will lead to our working for a profitable airline."

The balloting will begin in mid-May and will remain open for 15 days.

The deal says that effective June 1, pilots' composite hourly pay rates will be reduced 14 percent from the composite hourly pay rates that were in effect on Dec. 14. But on Jan. 1, composite hourly pay rates will be increased 1.5 percent. Further pay increases are included in later years of the revised contract.

The deal includes - in what appears to be an aid to the pilots if their pension plan is scrapped - the equivalent of an interest-bearing note of $650 million with a 15-year term; the exact details were not immediately clear. The company had previously offered only a $330 million note, while the union had been seeking a $1 billion note.

The long-term deal replaces an interim one the pilots had agreed to that became effective on Dec. 15. At the time it called for temporary cuts of 14 percent and other cuts equal to an additional reduction of 1 percent of wages. At the time, the value of the interim cuts was pegged at $143 million to $152 million a year on an annual basis.

Delta spokesman Bruce Hicks said the company would release a statement Saturday.

Delta, which filed for bankruptcy in September, has said its pilots earn an average of $157,000.

The agreement also says that if Delta determines that its pilots' retirement plan meets the standard for a distress termination and the company initiates proceedings to terminate the plan, the union "will not oppose such proposed plan termination."

In the event of termination of the Delta Pilots Retirement Plan, the pilots' defined contribution plan will be amended to provide a single company contribution rate equal to a flat 9 percent of earnings, the deal says.

Before the tentative agreement was reached, Delta had been seeking to void its contract with its pilots so it could impose the full cuts it was seeking. The union had threatened to strike if the contract was rejected by an arbitration panel.

The panel decision is now on hold with the tentative agreement, but it could resurface if the rank-and-file pilots reject the accord.

Delta's pilots previously agreed to $1 billion in annual concessions, including a 32.5 percent wage cut, in a five-year deal in 2004. But Delta, which has imposed pay cuts on other employees, said it needs more from its pilots.